March

2015 Issue #10

The Soter Group

Perspectives Unclassified 2014 Federal Cyber Security Spending Update

Reported fiscal year (FY) 2014 unclassified Federal cyber security spending is up 23% to $12.7 billion.
Federal Civilian spending increases for second consecutive year adds 16% over FY13 levels.
The rollercoaster ride of unclassified Federal cyber security spending continued in FY14 as reported
spending grew to $12.7 billion an increase of 23% from $10.3 billion in FY13. However, this total
remains below FY11 and FY12 levels of $13.3 and $14.6 billion, respectively. While these all indicate
that there is a large Federal market for cyber security activities, these significant and rapid shifts in
reported spending may leave the contractor community with more questions rather than answers.

FY09

FY10

FY11

FY12

FY13

FY14

FY14 v.
FY13, %

Total Unclassified Federal

Cyber Security Spending

$6.8

$12.0

$13.3

$14.6

$10.3

$12.7

+23%

Of Which: DoD

$4.2

$9.5

$10.1

$12.1

$7.1

$9.0

+26%

Of Which: Federal Civilian

$2.6

$2.6

$3.2

$2.6

$3.2

$3.8

+16%
(in $ billions)

What does this growth in spending really mean? What portion of this extra $2+ billion in FY14 spending
flowed to contractors? Or was it primarily used to pay government employees salaries and benefits?
Did it have a negligible effect on the contractor-addressable market? What should the private sector
expect in the current (FY15) and coming fiscal years (FY16) given the Presidents budget requests of $13
and $14 billion, respectively?
The Office of Management and Budget (OMB) changed the cyber security taxonomy in FY14 and created
three primary categories: (1) Prevent Malicious Cyber Activity; (2) Detect, Analyze, and Mitigate
Intrusions; and (3) Shape the Cybersecurity Environment. While this prohibits an apples-to-apples
comparison with pre-FY14 spending reports, this segmentation could provide some insight into the
drivers behind volatile spending levels.
Between FY13 and FY14, activities related to the Shape the Cybersecurity Environment category
received an increase in funding of over $1.7 billion or 42% growth, year-over-year. This category
includes activities such as workforce development, security training, standards development, and
research and development (R&D). While Federal cyber security and information assurance-related R&D
was estimated to have increased nearly 11% between FY13 and FY14 or approximately $70 million,
this accounts for only a small portion of the $1.7 billion jump.
The large shift in reported spending is partially due to workforce development and training activities but
primarily attributable to reclassification of personnel into cyber security-oriented positions. Spending
on personnel both government and contractor has historically been the largest category of Federal
cyber security spending; for example, in FY12, cyber security personnel expenditures totaled $13.2
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2015 The Soter Group. All Rights Reserved.

March 2015 Issue #10

The Soter Group

billion, or approximately 90% of the $14.6 billion total. Any large changes in spending are undoubtedly
associated with this area of spending.

Billions

Unclassied Federal Cyber Security Spending by Major Category

$7
$6
$5

Prevent Malicious Cyber Acnvity

$4
$3

Detect, Analyze, and Mingate

Intrusions

$2

Shape the Cybersecurity

Environment

$1
$-
FY13

FY14

Government Fiscal Year

Does this mean the Federal cyber security market is stagnant or unreliable given the annual exercise of
reallocating personnel expenditures and massive swings in cyber security spending? No. Cyber
security is certainly not a fad. The threat is very real and will persist, and the Federal government is and
will continue to have capability gaps and deficiencies to satisfy. The arbitrary labeling of spending as
cyber security, IT, health IT, or cloud computing does not really matter; it is the real substance of the
product, service, or solution that is being delivered to achieve a mission that matters.
As a Federal contractor, there are several key questions to focus on: Does government spending on
cyber security products and services and future government needs and requirements align with your
core capabilities? If so, do you know which government customers have both the money and the need?
And lastly, do you have a means to deliver, deploy, and implement that product, service, or solution?
About The Soter Group
The Soter Group provides services to both the Federal government and the commercial entities that
support it. Our Commercial Services Division provides market research and assessments, competitive
assessments, and strategic advisory services to commercial clients seeking to enter or grow in the
Federal government security market. Justin Taft, President & CEO, and Peter Wong, Director of Market
Research, authored these perspectives. The Soter Group welcomes the opportunity for our research to
be cited in third-party reports. To learn more, please visit www.TheSoterGroup.com and/or email
info@TheSoterGroup.com. To access and read our other reports, please visit: The Soter Group Market
Reports.
Report March 2015: Perspectives Unclassified 2014 Federal Cyber Security Spending
1100 North Glebe Road, Suite 1010, Arlington, VA 22201 | Tel: 703.224.4407 | Fax: 703.224.8001 | info@thesotergroup.com
2015 The Soter Group. All Rights Reserved.